Client: Homer and Marge, age 65
Job: Retired College Professors
Net Worth: $2,750,000
Children: All children are grown, married, self-supporting, and not living at home
Situation: Homer and Marge are collecting Social Security and withdrawing money from a savings account now to live on. They are unsure how best to create predictable, sustainable and increasing income from their investments. They saw Bill’s personal finance article in The Chronicle of Higher Education and requested a meeting.
After a 30+ year career in academe, Homer and Marge retired within a year of each other. They needed advice on managing this transition, including implications on their income, taxes, accounts, and asset protection strategies.
Homer had accumulated over $1 million in his numerous 403(b) plans (the nonprofit version of a corporate 401k), while Marge had accumulated almost $1 million in her plans. Both were receiving Social Security for over one year.
We made arrangements to consolidate and roll over Homer’s and Marge’s various 403(b) plans into IRAs so we could reduce the number of accounts (from 8 to 2), eliminate paperwork, simplify their portfolio, and achieve economies of scales thereby reducing their fee structure.
We broadly diversified their portfolio and educated them about the risks and potential rewards of their holdings. Additionally, we developed an income strategy based upon the latest research to increase the likelihood they will never run out of money.
To create a predictable stream of income, their portfolio transfers interest/dividends to a cash account every month. Then on a biweekly basis, a payment is sent electronically to their checking account to supplement their Social Security income. This strategy replicates their former biweekly paycheck from the college. Their portfolio, their income strategy and the amount of their withdrawals are monitored every month to ensure they stay on track.
Turning to asset protection, we invited Homer and Marge to a local workshop sponsored by a trusted colleague who is a long term care strategist. After attending, we coordinated with their attorney and accountant, and implemented a cost-effective strategy that will allow them to preserve their assets, dignity and control if or when a medical, nursing or home care episode develops.
A commitment to save and invest from an early age put Homer and Marge on the path to retirement success way before we met them. Retiring with no pension is not an easy feat, but it can be done. All it takes is some proper planning, guidance, and discipline. It is our pleasure assisting them.
*Names and some details have been changed to protect client confidentiality.